Insurance fraud allegations rose 22% as inflation worsened and fraudsters were more involved in car accidents

Incidents of insurance fraud likely spiked last year, as the cost of living crisis took its toll and people tried to sneak in fake claims under the guise of Hurricane Gabriel.

there was
22 percent increase in the number of insurance fraud allegations filed with the nation’s Insurance Fraud Bureau in 2023 compared to 2022.

The office’s director, Yvonne Wynyard, said insurance fraud usually rises during difficult economic times.

“It is easier for fraudsters to get money if they arrange a car theft, or have a car accident after inflating the value of their car,” she said.

Paul Collins, head of New Zealand’s Suncorp’s fraud intelligence team, pointed to an uptick in staged car accidents, some of which “suggest gang involvement”.

He mentioned a case that came across his office where someone claimed that a car collided with the back of his car after he braked suddenly to avoid hitting an animal on the road.

However, a collision investigator concluded that the story was not true, as the damage to both cars indicated that they had collided with a fixed object, such as a concrete pillar.

Claims submitted by the two drivers to two different insurance companies were rejected.

Last summer’s severe weather events also saw people inflate insurance claims or file claims for accidents that never happened, Collins said.

Some people have gone so far as to file weather-related claims (for flooded cars, for example) from parts of the country that were not even affected by the bad weather, Wynyard said.

Family, friends or colleagues usually call the alleged scammers to the office, she said.

She said that people do not like to see a minority stealing from the system at the expense of the majority.

“So, they’re more willing to talk to people and say, ‘That’s not right.’ Everyone knows that insurance premiums are affected by the increased fraud out there.”

It is impossible to know how much fraud has been committed. But the office, which is funded by the insurance industry, estimates it is worth about 10 percent of the value of premiums the industry receives each year.

Accordingly, it is believed that approximately $880 million in fire and general (not life and health) insurance fraud will be committed in 2023.

‘Serious consequences

The consequences of committing fraud are not worth it, Wynyard said.

The fraudster will have a hard time getting insurance cover again. If they can get some, it will come at a cost.

This may make them struggle to buy a home, as banks require mortgage holders to take out insurance.

Wynyard noted that the penalty for fraud was “very severe” and long-lasting.

She explained that the bulk of insurance claims filed in New Zealand are recorded in a register that all insurance companies can access.

Collins recently dealt with a client who filed two claims for a damaged television with two different insurance companies. The claim was denied, and the customer’s policy was cancelled.

Wynyard explained that if an insurance company has reason to believe a claimant poses a risk to its business, it will report him to the registry.

“It’s a powerful tool,” she said.

“If you’re stuck with that, you’re kind of on the registry indefinitely as a risk to insurance companies. You’ll find that getting insurance from another insurance company is very difficult.”

The problem is that insurance companies don’t always check your history when getting insurance. So, you may spend years paying premiums, and then run into problems when you finally file a claim.

“Insurance companies will gladly cover you until such time as you claim, and then they will start investigating and looking at your behavior in the claim,” Wynyard said.

Collins noted that your claim could be denied, for example, if your insurance company realizes that you never disclosed the fact that your old insurer canceled your policy.

“Insurance contracts are also contracts of good faith, which means there must be an honest disclosure of information before you take out the insurance policy, as well as at the time of the claim,” Collins said.

Wynyard realized that people did not always realize that opportunistic behavior could be fraudulent.

For example, spilling coffee on your laptop, but saying that the laptop and phone were damaged due to the accident, is fraud.

Again, Wynyard said committing such a seemingly low-level crime was not worth the risk of being effectively blacklisted.

Fraud also includes failing to provide an insurer with relevant information, or providing incorrect information to support a valid loss – for example, Collins said. By saying that a different person was driving a vehicle involved in an accident.

He said Suncorp used “external investigative agencies” to conduct face-to-face interviews and in-depth reviews of some of the allegations.

“Many professionals are involved throughout the claims review process, including licensed investigators, accident reconstruction experts, digital forensics, mechanical experts and engineers. We also use fire investigators and collision scene specialists when appropriate.

Jenny Tibshirini is Herald Wellington Business Editor, based in the Parliamentary Press Gallery. She specializes in government policy making, reserve banking, economics and banking.